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Thursday, May 2, 2013

Raghuram Rajan, the chief economic adviser to India’s Ministry of Finance, argues that economic growth slowed down in India due to two reasons:

As India’s existing economic institutions could not cope with strong growth, its political checks and balances started kicking in to prevent further damage.

Investment slowdown began as political opposition to unbridled development emerged. The resulting supply constraints exacerbated inflation.

He prescribes the following solutions:

India must improve supply, which means shifting from consumption to investment.

By creating new, transparent institutions and processes, which would limit adverse political reaction.

Over the medium term, axe the thicket of unwieldy regulations.

One example of a new institution is the Cabinet Committee on Investment, which has been created to facilitate the completion of large projects. By bringing together the key ministers, the committee has coordinated and accelerated decision-making, and has already approved tens of billions of dollars in spending in its first few meetings.

India needs less consumption and higher savings.

The government has tightened its own budget and spent less, especially on distortionary subsidies.

About

Formerly, economics officer at Asian Development Bank, Nepal Resident Mission. Worked as a researcher at SAWTEE, Kathmandu. Also, worked as a consultant for Ministry of Commerce & Supplies, Government of Nepal; FAO; UNDP, GIZ-CIM, and ADB among others. I was an op-ed columnist for Republica between December 2008 – June 2012. I also worked as a Junior Fellow for Trade, Equity & Development program at Carnegie Endowment for International Peace, Washington, D.C .